When a Californian becomes mentally incapacitated and unable to manage their financial affairs, it often falls to friends or family members to step in. However, even with the best intentions, navigating the procedural and legal hurdles at banks and brokerage firms can feel overwhelming. This guide provides an overview of the options available to help you manage the finances of an incapacitated loved one. 

Understanding the Scenario 

Law professors often use “hypos” (short for hypothetical examples) to explain legal concepts, and we’ll use one here. Imagine you are taking care of your elderly mother, who can no longer manage her financial affairs due to health issues. We’ll refer to her as “Mom.” 

You need to pay Mom’s bills, cover her care expenses, and manage her assets. The big questions are: 

• How do you gain access to her accounts? 

• How do you legally manage her money? 

• How do you sell her home to help pay for her care? 

Step 1: Check for Existing Financial Arrangements 

1. Joint Accounts 
   If Mom has named you as a joint owner of one of her bank or brokerage accounts, you can use that account to pay for her care. While this is often the simplest and most immediate solution, estate planning attorneys generally advise against relying on joint accounts as part of an estate plan. Joint accounts carry significant risks, including potential exposure to creditors, loss of control over funds, and unintended consequences for estate distribution. Alternative estate planning tools, such as trusts or powers of attorney, often provide greater protection and flexibility. 
2. Estate Planning Documents
   Look for Mom’s estate planning documents, such as a trust or a durable power of attorney (DPOA). These documents are key to avoiding lengthy and costly court processes. 

Step 2: What If There’s No Trust or DPOA? 

If Mom does not have a trust or a durable power of attorney, you will likely need to establish a conservatorship of the estate. Unfortunately, this is a challenging and time-consuming process in California. Conservatorships involve the court overseeing financial matters, which can be expensive and burdensome. 

• Why Conservatorships Are Problematic 
  Conservatorships are sometimes described as probate on steroids. They are costly, require court approval for many actions, and involve ongoing reporting and oversight. 
• Why You’ll Need an Attorney 
  You cannot set up a conservatorship without an attorney because the process requires securing a conservatorship bond, and attorneys are mandatory for this step. If you’re in this situation, the best first step is to consult with a conservatorship attorney. 

Step 3: What If There Is a Durable Power of Attorney? 

If Mom has named you as her agent (or “attorney-in-fact”) under a durable power of attorney, you may have the authority to manage her finances and even to sell her home. However, this isn’t always straightforward. 

• Potential Challenges with Banks and Title Companies 
  Banks and title companies sometimes refuse to honor durable powers of attorney. In such cases, an experienced estate and trust attorney can help negotiate with the bank or title company or explore alternative options. 

• Flexibility of Acting as an Agent 
  As an agent under a DPOA, you have significant discretion. You can choose to act only when necessary and are not obligated to take on tasks you do not feel comfortable managing. 

Step 4: What If There Is a Trust? 

If Mom has created a trust, managing her finances may involve taking over as trustee. This process typically requires assistance from an estate and trust attorney.

• Establishing Authority as Trustee 
  You’ll need to prepare a certification of trust, which includes key documents such as trust excerpts, a death certificate, resignation letters, or a doctor’s letter if a trustee is incapacitated. These documents confirm your authority to act as trustee. 

• Managing Trust Assets 
  Once you have control of the trust, you can manage assets held in the trust’s name. However, assets held solely in Mom’s name will require the DPOA or a court process to access. 

• Trustee Responsibilities 
  Acting as a trustee involves significant responsibilities. You must: 

• Protect and manage Mom’s assets. 

• Diversify investments. 

• Pay taxes. 

• Provide regular accountings to beneficiaries. 

Trustees can be held personally liable for mismanagement, so working with an attorney is essential. The good news? The trust typically pays for attorney fees, ensuring you have the support needed to fulfill your duties. 

Step 5: How Do You Sell Mom’s Home? 

Selling Mom’s home may become necessary to cover her care expenses, but the process depends on whether she has a durable power of attorney or a trust. 

• Using a Durable Power of Attorney (DPOA) 
  If Mom named you as her agent under a valid DPOA, you can sell her home by providing the DPOA document to the title company handling the transaction. Title to the home must be in Mom’s name, and the DPOA must specifically grant the authority to sell real estate. Some title companies may require additional documents, such as a doctor’s letter confirming Mom’s incapacity. 

• Using a Trust 
  If Mom’s home is held in her trust, and you are the successor trustee, you can sell the property on her behalf. This requires preparing a certification of trust, along with supporting documents (e.g., affidavit of death of trustee, resignation, or incapacity letters from the prior trustee’s doctors, if applicable). The trust allows for a seamless transfer of authority, and the proceeds from the sale will remain in the trust for Mom’s benefit. 

• Challenges with Sole Ownership 
  If Mom owns the home outright (in her name alone) and there is no DPOA or trust, a court-supervised conservatorship may be required to authorize the sale. This underscores the importance of proactive estate planning to avoid such hurdles. 

Final Thoughts 

Taking over the financial responsibilities for an incapacitated loved one is challenging, but proper planning can make the process smoother. If you’re facing this situation, whether it’s a matter of establishing authority under a trust, navigating a conservatorship, or selling a home, it’s crucial to consult with an experienced estate and trust attorney. 

If you need help managing Mom’s finances—or anyone else’s—feel free to contact me for a free consultation. Together, we can find the best path forward to ensure your loved one’s financial affairs are handled with care and professionalism. 

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*This blog is intended for informational purposes only and does not constitute legal advice. For specific legal guidance, please consult with a qualified attorney.*